Determine the operating cash flow, Financial Management

Determine the operating cash flow:

E4-1 The installed cost of a new computerized controller was $65,000. Calculate the depreciation schedule by year assuming a recovery period of 5 years and using the appropriate MACRS depreciation percentages given in Table 4.2 on page 117.

(1) 65,000 20% 13,000

(2) 65,000 32 20,800

(3) 65,000 19 12,350

(4) 65,000 12 7,800

(5) 65,000 12 7,800

(6) 65,000 53,250

Totals 100% 65,000

E4-2 Classify the following changes in each of the accounts as either an inflow or an outflow of cash. During the year (a) marketable securities increased, (b) land and buildings decreased, (c) accounts payable increased, (d) vehicles decreased, (e) accounts receivable increased, and (f) dividends were paid.

(a) Marketable securities cash outflow

(b) land and buildings decreased cash inflow

(c) accounts payable increased cash inflow

(d) vehicles decreased cash inflow

(e) accounts receivable increased cash outflow

(f) dividends were paid cash outflow

E4-3 Determine the operating cash flow (OCF) for Kleczka, Inc., based on the following data. (All values are in thousands of dollars.) During the year the firm had sales of $2,500, cost of goods sold totaled $1,800, operating expenses totaled $300, and depreciation expenses were $200. The firm is in the 35% tax bracket.

Operating Cash Flow

Kleczka, Inc.

Sales 2500

Less: Cost of Goods Sold -1800

Gross Profit 700

Less: Operating Expenses - 300

Operating Income 400

Add: Depreciation 200

Operation Cash Flow 600

Less Tax 210

Net Operating Cash Flow 390

E4-4 During the year, Xero, Inc., experienced an increase in net fixed assets of $300,000 and had depreciation of $200,000. It also experienced an increase in current assets of $150,000 and an increase in accounts payable and accruals of $75,000. If operating cash flow (OCF) for the year was $700,000, calculate the firm's free cash flow (FCF) for the year.

Operating Cash 700,000

Depreciation +200,000

900,000

Increase in current assets - 150,000

750,000

Increase in current Liabilities 75,000

825,000

E4-5 Rimier Corp. forecasts sales of $650,000 for 2013. Assume the firm has fixed costs of $250,000 and variable costs amounting to 35% of sales. Operating expenses are estimated to include fixed costs of $28,000 and a variable portion equal to 7.5% of sales. Interest expenses for the coming year are estimated to be $20,000. Estimate Rimier's net profits before taxes for 2013.